At EBC we believe tax compliance and planning forms an integral part of any wealth plan. Even though all clients are different they all need to plan and know as far as is possible their potential tax liabilities arising from actions they have or intend to take and the impact on their overall wealth. We aim to ensure that as part of your tax planning you are aware of and meet your local and overseas tax requirements, obtain the tax reliefs available to you and limit the risk of non-compliance. With the implementation of CRS and automatic exchange of financial information(AEI) from 2017 a review of its implications should be undertaken now to see what ,if any, impact it will have on your overall wealth.
We at EBC understand how taxes can affect financial planning and can bring this experience and our international network of tax specialists to assist our clients and their advisors as different wealth management strategies are evaluated. As part of the tax planning process clients should be aware of the impact of the following general matters on their wealth and its preservation:
- Common Reporting Standard (CRS) and Automatic Exchange of Financial Information (AEOI)
- Tax residency
- BEPS (base erosion and profit shifting)
- Tax Information Exchange Agreements (TIEAS)
- European Union (EU) 4th Directive
- Mutual Assistance Directives (MADs)
- FATCA implications
- FINBAR implications
- Section 311 implications
For individuals, their tax residency will be the main factor in determining where they are liable for tax on their worldwide income and gains. Many countries will deem a person tax resident if they spend over 183 days a year there. Under this rule it is possible to be tax resident in more than one country in a year and be liable to tax on worldwide income in those different countries. The use of double tax treaties should mitigate the overall tax payable. For individuals, Monaco should be considered for residency purposes.
For companies, their tax residency will in most countries depend on where the company is incorporated, or managed and controlled.
COMMON REPORTING STANDARD-CRS
Monaco has agreed to start the automatic exchange of financial information in September,2018. Under this legislation ,which 94 countries have agreed to implement so far ,these countries will automatically report on an annual basis with each other. Its scope is threefold , based on the residency of the individual rather than on citizenship (as with FATCA), to report as follows:
(a) Financial information
- Investment income of all types to include interest, dividends, and income from insurance policies
- Account balances at the year end
- Sale proceeds from financial assets
- Payments into and from the account to the individual account holder during the period
- Income from employment
- Directors’ fees
- Life insurance products
- Ownership of and income from immovable property
The details of the underlying currencies of the financial assets must also be reported.
(b) Financial institutions
The institutions that will need to report this information include
- Banks and custodians
- Brokers, collective investment vehicles and insurance companies
- Portfolio managers
- Foreign exchange providers
- Any entity that invests, administers or manages financial assets or money on behalf of other persons
(c) Reportable accounts
These are accounts held by the following:
- Corporate entities
There is a requirement to “look through" passive entities to report on the individuals that ultimately control these entities. As part of this process financial institutions must undertake a set of standard due diligence procedures to identify the account holder. The information to be supplied in the annual reporting includes the following:
- Name of the individual
- TIN( tax identification number)
- Date and place of birth
- Account number
- Name and identifying number the financial institution holding the account
As at 5th May, 2017 the following 100 countries have agreed to implement AEOI:
Countries committed to Automatic Exchange in 2017
Anguilla, Argentina, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Turks and Caicos Islands, United Kingdom.
Countries committed to Automatic Exchange in 2018
Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Barbados, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Curacao, Dominica, Ghana, Grenada, Hong Kong (China),Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Niue, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Trinidad and Tobago, Turkey, United Arab Emirates, Uruguay, Vanuatu.
GAAR AND ANTI-AVOIDANCE LEGISLATION
Most onshore tax jurisdictions have implemented anti avoidance legislation and general anti avoidance rules (GAAR) to limit or remove the tax benefits that may arise from individuals or companies resident in onshore countries using structures and trusts in low or no tax jurisdictions.
The implementation of such legislation is expected to increase as revenue authorities seek to limit the effects of tax avoidance.
US FATCA AUTOMATIC DISCLOSURE
The 34 countries eligible to receive automatic information from the US IRS about their taxpayers’ U.S. accounts from 30th September, 2015 are as follows:
Australia, Brazil, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Guernsey, Hungary ,Iceland ,India ,Ireland ,Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Slovenia, South Africa, Spain, Sweden, and United Kingdom.
The information to be exchanged includes the name, address, tax identification number, account number, account balance, dividend and interest payments.
- Residency and CRS review
- Trust tax planning
- Capital Gains Tax planning
- Review of other jurisdictions
- Review of company structure
- Review the reliefs available
- Review of company structure
- Review the reliefs available
- Review of your current tax affairs
- International taxation compliance
- Review of withholding taxes deducted
- Offshore taxation issues and advice